I think they are partly right. In the US (the developed world) the price of ingredients is a smaller proportion of the cost of processed food than it is in parts of the world where processed food is a luxury item. The picture is bigger than the continental landmass of the US.

Rising food prices in the US are more than likely going to be driven by the high cost of fuel, more than the ingredients.

But in a world where demand is increasing, the excess of food production over demand is falling (through drought, raising living standards AND taking grain out of the equation by burning the excess as fuel, one way or another), the price can only rise until demand meets supply.

Unfortunately demand for food is pretty constant and in many parts of the world wages are insufficient to pay for more expensive food grains.

We’ll never know what would have happened if the US hadn’t rushed into ethanol from corn as a short term fix, but it is more than possible that the price of food grains would have been lower if everything else had stayed the same.

It is interesting that a relatively small grain producer like Australia, with around 1.4% of global producton in 2004 can have such a big effect, when taking a big chunk of a big producer like the US out of the equation has such a marinal effect on food prices. The FAO estimated in 2004 that the US produced 17% of the world’s grains. Last year close to 25% of the US corn crop was used to make ethanol. Ok there is some residual value in distillers’ grains, but that has to be a significant volume of the world’s calories. Or am I barking up the wrong tree?